Sweet Opportunity: Ethanol and a Grand Bargain for Cuban Democracy

Creative bipartisanship in Washington that ties the potential of a massive boom in ethanol’s influence throughout the Western Hemisphere to ending United States oil addiction could also help ensure that nearly five decades of Cuban dictatorship will be followed by a transition towards democracy, a market economy and real independence, and not succession by Fidel Castro’s brother Raul or another Communist figure.

Fidel Castro’s abrupt U-turn in his support for ethanol, attacking plans by the United States and Brazil to promote the production of a sugarcane-based fuel alternative in the Western Hemisphere, shows the length to which the Cuban dictator will go to protect his Venezuelan patron Hugo Chavez’s oil lubricated grab at Latin American hegemony, even at the expense of future Cuba independence. Castro’s newest claim, that production on the island of ethanol from sugarcane—the cost-effective method, by the way, successfully used in Brazil—was ``no more than a dream or a delirium,’’ is nothing if not the latest example of how his once spellbinding rhetoric is running out of gas.

In fact, President Bush’s new bio-fuels pact with Brazil, joining the world’s two largest ethanol producers in what could become a new alliance to substantially reduce regional dependence on imported oil, points to other ethanol-related policy options the United States should pursue in the region simultaneously. If implemented, these would improve the prospects for post-Fidel democracy and independence in Cuba, reduce future tensions between Cubans and Cuban Americans, and ease future relations between the U.S. and some of its other Caribbean allies.

The framework for just such a possibility already exists in the plan launched by Bush and Brazilian President Luiz Inácio Lula da Silva to promote the production of sugar cane-based ethanol in Central American and the Caribbean, selling part of the bio-fuel to the U.S. as part of a special Caribbean Basin trade regime. By promising to include Cuba in a partnership that allows sugarcane-based ethanol equal footing in competition with a heavily subsidized corn-based ethanol industry in the United States that is both more expensive and more environmentally taxing, Castro’s claim that the U.S. focus on ethanol, resulting in the “internationalization of genocide” can be exposed from what it is—the death rattle of a tyrant.

* Real Cuban Independence. Creative bipartisanship in Washington that ties the potential of a massive boom in ethanol’s influence throughout the hemisphere to ending United States oil addiction could also help ensure that nearly five decades of Cuban dictatorship will be followed by a transition towards democracy, a market economy and real independence, and not succession by his brother Raul or another Communist figure.

Castro’s claim that his revolution brought independence to Cuba by distancing it from the United States is belied by the fact that a $5 billion annual subsidy from the Soviet Union during the Cold War has been replaced by a similar dependency on Venezuela for which the Cuban people continue pay a high price in liberty denied. Cuban and Venezuelan leaders are now tightening that dependency.

Already Venezuela’s authoritarian President Hugo Chavez has dipped into his country’s tremendous oil reserves to put Castro’s ailing rule on economic life support with the provision of a reported 100,000 barrels of cheap oil a day. Last year, Chavez also promised to help the Cubans completely reactivate its Cienfuegos refinery and to supply it with 70,000 barrels per day of unrefined oil.

Only a few weeks ago, before Castro’s and Chavez’s scare-mongering in the wake of the Bush-Lula initiative, with the dyspeptic duo now claiming that ethanol is a threat to the poor, the like-minded despots in Havana and Caracas agreed to their own cooperative bio-fuels pact—producing alcohol from that redoubtable staple of the Cuban economy–sugarcane–and thereby offering both Cubans and Venezuelans the opportunity of replacing some fossil fuels with more environmentally friendly bio-fuels. But Chavez’s offer of help would have only increased Cuban dependence on his regime—the 11 new ethanol plants planned under the cooperative program were to be located in Venezuela.

Faced with the choice of promoting environmentally friendly energy or maintaining a gusher of petrodollars—he heads the country that ranks fifth in the world in the production of crude oil—that enables him to buy friends around the region, Chavez predictably opted for the latter. Suddenly concerned with the “ethics” of ethanol production, the man who once considered declaring a national religion with himself as the leader, claimed that “when you fill a vehicle’s tank with ethanol, you are filling it with energy for which land and water enough to feed seven people have been used,” the bio-fuel being used to fill “rich people’s cars.”

It is clear that real independence for Cuba will come only when it is able greatly reduce its dependence on Venezuela and generate energy resources sufficient to both take care of its own internal demand and have some left to sell overseas. Bagasse, the plant matter left over after sugar has been extracted from sugarcane, is an abundant natural resource Cubans can use to make ethanol and to fuel the island’s own liberation.

The U.S. Congress is now debating whether to enter into a new era of free trade with our southern neighbors by eliminating the protectionist barrier against Brazilian bio-fuels in the form of a 54-cent-per-gallon tariff on imported ethanol that has been levied through January 2009. Although there is not much ethanol available yet for import, the tariff on sugar-based ethanol gives unfair advantage to mostly Midwestern farm producers of a corn-based version, with farm-state lawmakers gearing up for the fight to renew the levy, and thus dominance in the enormous U.S. market, perhaps indefinitely.

In order to promote Cuba’s true independence and democratization, the Bush Administration should signal its willingness to immediately include Cuba as a preferred member of its hemispheric bio-fuels alliance, once the island signals it is on the road to democratic reform, including the respect for human rights.

By removing the tariff on sugar based ethanol and giving Cuban-produced ethanol potential equality of opportunity with U.S. producers of corn-based ethanol—who now receive a federally-subsidized 51-cents a-gallon tax credit, Congress and the president would send a strong message about Washington’s willingness to do everything it can to promote both Cuban democracy and independence. Rather than depending on Chavez’s refineries to make Cuban bagasse into useable fuel, access to U.S. markets will help give Cuban entrepreneurs the incentive to build ethanol plants in Cuba, adding to that country’s revenues and employment base.

In addition, support for joint ventures by U.S. automakers with Brazil, whose auto industry is already producing “flexible fuel” cars that run on ethanol, could help Cubans in a new democracy replace their 1950s-vintage fleet with low-cost vehicles using cutting edge, environmentally-friendly technology.

* Untying a nasty legal tangle.The U.S. should make clear that its support for entry by Cuba into the advanced guard of countries developing bio-fuel technology, saving money and generating wealth on the island, could also help both countries put behind them the thorny issue of reparations for American property expropriated by Cuba in the 1960s.

Nearly 6,000 Americans lost $1.8 billion in the nationalizations, a figure that has grown with inflation and interest to as much as $13 billion today. Cuban sales of ethanol in the U.S. market can help pay off that debt, without forcing long-term Cuban residents of American properties to vacate their homes or give up their livelihoods.

* Preserving Caribbean Relations. When the U.S. began its embargo of Cuba decades ago, the U.S. market for imported Cuban sugar was divided up among other Caribbean nations. Should post-Castro Cuba try to sell its sugar production to the United States, regaining its high percentage of the lost market, other Caribbean islands will feel the economic pinch. (In fiscal year ’07, for example, the Dominican Republic’s raw cane sugar allocation to the U.S. was 225,573 metric tons.) Getting Cuba to devote its sugarcane to ethanol would also eliminate a future challenge from Cuba to other sugar producing islands of the Caribbean and ease U.S. relations in the region.

Thus the promotion of ethanol production in Cuba has many advantages. It is unlikely that the United States possesses all the farmland needed to produce all the ethanol it could use and still provide the corn needed for corn-derived food products and animal feedstock. It will require encouraging alternative fuels from overseas sources as well, particularly those countries whose sugar-based ethanol is about 25 percent cheaper to produce than its corn-based substitute.

With his recent trip to the region, President Bush took an important step in redeeming his pledge to make Latin American neighbors priority partners in promoting democracy and creating greater prosperity. By promoting Cuban democratization by linking it to the prospect of participating in a new deal in the hemisphere for environmentally sound energy self-sufficiency, the United States can help its island neighbor put to rest its living legacy of dependence and dictatorship.

Martin Edwin Andersen, a long-time human rights activist and news correspondent in Latin America, is the editor of a United States Agency for International Development (USAID) study on possible electoral transitions in Cuba.

An article in The Economist, published on April 7th with the unfortunate title “Castro was right” nonetheless underscores the value of the idea, which is hardly far fetched.

It says, in part: “Ethanol made from sugar cane, by contrast, is good. ... Other developing countries with tropical climates, such as India, the Philippines and even Cuba, could prosper by producing sugar ethanol and selling it to rich Americans to fuel their cars.”

Permit me to add a bit of vanity here: The piece that I posted in this space was first run by the Argentine Web site, Offnews.info, on April 6th, a day before The Economist ran its article.